Carbon emissions and corporate financial performance: A systematic literature review and options for methodological enhancements

Abstract

This paper systematically reviews the existing empirical literature on the linkage between carbon emissions and corporate financial performance (CFP). The results show that superior corporate environmental performance (CEP) pays off when market measures, such as Tobin’s q, are linked to a firm’s level of carbon emissions. However, modeling the relationship between carbon emissions and CFP is a complex task. This complexity is illustrated by methodological differences between the studies included in the reviewwhich may systematically influence the results. Therefore, a set of options for methodological enhancements is suggested which may guide further inquiries into the relationship between carbon emissions and CFP.